China & World Economy / 142–166, Vol. 30, No. 2, 2022

Decomposition Analysis of Poverty Reduction in Rural China: 2007–2018

Chuliang Luo

Abstract

Using the last three waves of the rural household surveys conducted by the Chinese Household Income Project in 2007, 2013, and 2018, this paper focuses on changes in poverty in rural China. The paper decomposes poverty change into the growth effect and the inequality effect, and also decomposes the contributions of income components, concentrating particularly on income from public transfers. Economic growth had a very significant poverty reduction effect for both absolute and relative poverty, but the inequality effect mostly offset it; in total, absolute poverty reduced significantly, and relative poverty increased from 2007 to 2018. Local wage income became the main contributor to both absolute and relative poverty reduction, replacing household agricultural operational income, and the contribution of wage income from migration declined. Public transfers effectively reduced absolute poverty but not relative poverty.